We exploit the regional variation in negative attitudes towards immigrants to Sweden in order to analyse what are the consequences of such attitudes have on immigrants welfare. A well educated immigrant from a non developed country who lives in a municipality with strong negative attitudes earns less than what she would earn if she lived in a municipality where natives are more positive. If attitudes changed from the average level to the most positive level, her wage would increase by 12%. This would reduce the wage gap to well-educated immigrants from developed countries by 70%. We interpret this eect as evidence of labour market discrimination. The same reduction in negative attitudes would increase the welfare of immigrants from Africa and Asia, through their wage and local amenities, by an equivalent to one third of their wage. The analogous amount for immigrants from South America and Eastern Europe is one fourth of their wage if they are well educated and one tenth otherwise.

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We examine the impact of discrimination on labour market performance when workers are subject to a risk of losing skills during the experience of unemployment. Within a search and matching model, we show that all natives and immigrants are affected by discrimination. Discrimination in one sector has positive spillovers, inducing employment increases in the other sector. Discrimination may induce immigrants to train more or less than natives, depending on the sector where it is present. Welfare tends to be most negatively affected by discrimination among highproductivity workers.

We examine the impact of discrimination on labour market performance when workers are subject to a risk of losing skills during an unemployment experience. Within a search and matching framework, we show that both natives and immigrants are affected by discrimination. Discrimination in one sector has positive spill-overs, inducing employment to increase in the other sector and
the effect on labour market performance therefore depends on whether discrimination is present in only one sector or in both sectors. Discrimination may induce workers to train more or less than natives after having lost their skills, dependent upon which sector there is discrimination. Net output tends to the be most negatively affected by discrimination among high-skilled workers.

This paper explores potential explanations behind the educational gap between young natives and immigrants using two measures, negative attitudes towards immigrants and networking, which may influence natives and immigrants differently. The paper considers, both theoretically and empirically, the impact of negative attitudes and networking taking into account that these parameters may influence high and uneducated workers as well as immigrants and natives differently, creating different incentives to acquire education for the two ethnic groups. Using rich Danish administrative data, this paper finds evidence that greater negative attitudes increase incentives for males to acquire education and that networking also increases immigrant education.

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We exploit the regional variation in negative attitudes towards immigrants to Sweden in order to analyse the consequences of the attitudes on immigrants welfare. We find that attitudes towards immigrants are of importance: they both affect their labour market outcomes and their quality of life. We interpret the negative effect on wages as evidence of labour market discrimination. We estimate the welfare effects of negative attitudes, through their wage and local amenities, for immigrants with different levels of skills, origin, gender and age.

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The eects of discrimination of immigrants on the labour market are studied within a search and wage-bargaining setting including a risk of losing skills during the experience of unemployment. The negative eects of discrimination in the form of higher unemployment and lower wages spread to all workers, immigrants and natives, in all sectors of the economy. The eect is stronger for immigrants, but natives suer as well. An increase in the share of immigrants in the economy exacerbates the problem of discrimination.